We have another case of a questionable halt on Nasdaq today with MSFT. Those happen more and more often on Nasdaq, I thought one of the characteristics of this market was uninterrupted trading. This is certainly not what we've seen recently. I personally think stocks should not be halted because there is no reason to do so. People should be able to trade at all time, too bad for those who don't follow their positions and don't put stops when they invest in the market. I would think most traders would be opposed to halts but nobody seems to care. To the contrary, they are viewed as necessary to be fair to every participant involved in the market! What a BS I think it is just to protect the MMs and specialists. The Fut are tanking now that MSFT is released for trading ahah! Has anybody been caught in a stock being halted? Can you see something is wrong just before a stock is halted to get out on time? I would appreciate your comments.
I also fail to see the necessity of trading halts, except in cases of fraudulent activity, such as the EMLX fake news wire. The logic is to give people enough time to absorb the news. What it really does is cause great instability in the stock's price. Most stocks end up gapping up/down after the halt is over. This makes it very much impossible to control your position and decide when to take a profit/loss. Just another way for Wall Street to punish us outsiders, I guess.
It seems like it is supposed to give the MMs an opportunity to gap the stock to a more reasonable level given the news. If the stock had to trade to the new level, the MMs (who are forced to keep a bid/ask) would have to sell into rabid buying on the way up because everyone is buying (and no one is selling) -- MMs would be losing money quickly. So, it sounds like halts protect MMs.
The breakdown occurred after MSFT was released again for trading. It traded more than 5.6 million shares within the first 5 minutes after the halt which apparently was too much for Nasdaq's systems to cope with.
On the Nasdaq most trading halts are imposed at the request of company management. So this MM conspiracy theory is a little far fetched. In addition large MMs often carry considerable inventory and thus can themselves be hurt by gaps. On the NYSE there's also trading halts due to excessive order imbalances. That alone would have prevented the EMLX hoax from doing the damage it did had it been a listed stock.
Here's a great story about halts, from the EMLX hoax that mgregor mentioned. I had been watching EMLX, and it had run up from the 50's to over 110 in a period of a week or so. Since it had such a massive runup, I bought 3 100 strike put options on EMLX for $3.90 per contract. 3 days later in the morning I was watching the stock, and all of the sudden it starts tanking. It went from 110 to 46 in a period of 5 minutes. When it got into the 40's I said to myself, that's good enough for me, and sold my puts for a $13,000 profit. Literally a second after I got my execution the quotes froze and trading had clearly been halted. I thought I was okay, until I got a phone call from IB saying that according to them my trade executed 4 seconds after the halt, and was being broken. By then, it had become known that the press release was a hoax. I was despondent, needless to say. An hour later IB called back and had checked with the PHLX where my trade executed, and they showed that my trade actually executed 3 seconds <b>before</b> the halt, and my trade would be honored. Although I made out great from the situation, the halt almost killed me. What's worse is what the halt did to investors and traders who bailed out of the stock as it was tanking, only to have it halted and reopen back up in the 100's. These poor people never got a chance to buy the stock back near the prices they sold once it was discovered that the news was a hoax. Had there been no halt, at least they could have had the chance to try to get back in as the stock moved back up. Instead there was no move back up. It halted in the 40's and reopened in the 100's. The moral of this story is that halts negate the concept of efficient markets, in that price movements are governed by supply and demand, and yes, news (whether real or not) affects that. In this case (and many others) the trading halt needlessly screwed a lot of people. When a company releases earnings, often its price swings all over the place, finally settling at a level that buyers and sellers agree upon as an appropriate one. Why don't the exchanges halt all earnings releases? My opinion is that halts are unnecessary and dangerous, not to mention arbitrary. Once again an example of the powers that be claiming to be "protecting" participants, but really in the end helping no one.
not a blanket defence of Nasdaq halting policies.....but Thursdays' halt of softie was because the ruling that was release was 100 pages long. I know the media loves sound bites like 'no breakup' but this ruling was a bit more complicated than that. According to Nasdaq, they are trying to maintain a fair market. This means allowing everyone to read and collect their breath before starting again. What I don't understand is how people were trading the Qs when a large chunk of it was missing! btw, that's why the Qs and the comp ramped at 2:50pm (they thought MSFT would gap up so they loaded on the Qs) turned out to be just a blip as that didn't happen
Just curious who actually has the power to halt a stock? On Nasdaq? on NYSE? Ofcourse without haults we traders would have lot more opportunities to make money.
Babak, How many traders do you think will actually read throught a 100+ page court ruling that even experienced attorneys will graple to define in the coming months? Come on, this practice of halting stocks is just another gimmick for hurting daytraders under the pretext of "protecting" us.